Compliance by Design in mortgage broking.

In the past, compliance has rarely been a strategic function. 

It has typically operated in isolation, tasked with preventing negative incidents occurring, with a core focus on defining rules and frameworks to meet the requirements of relevant regulations and laws. 

There is a need to move away from this status quo – a world where compliance comes first –  towards a world that is outward looking and focused on delivering comprehensive, exceptional customer outcomes. Imperatively, this doesn’t reduce the significance of compliance. Rather, it is about changing what we can achieve in a world where regulation will evolve at a faster pace. 

Ultimately, it will be critical to enable brokers to succeed in this new world through delivering the right technology and processes that can save time, keep them safe from risk, find and keep clients and build their businesses. 

But the question is: How?

Focus on the customer and the rest will follow

Within both financial services and the broker industry, regulatory reform will continue to be the largest driver of change. Regulators have been further empowered in the wake of the Hayne Royal Commission and are demanding the industry invests and expands their compliance functions, with the intent of delivering better outcomes to customers.

Yet, despite this intention, layers of extra regulation and compliance often leads to the opposite. The typical response to increasing regulatory change is reactive, hiring additional resources and adding layers of tasks and controls designed to ensure compliance. 

The common error when attempting to meet these new regulatory requirements is focusing on control and risk. This approach neglects the customer experience. The need to avoid financial and reputational damage from the consequences on regulatory non-compliance is driving this. However, in today’s competitive environment, customer experience can not be sidelined.

As such, there is now a need to work collaboratively where, as an example, regulatory forums blend with design and technology sessions. In turn, this ensures the customer is always at the forefront of any regulatory or compliance decision. In doing so, compliance can become more seamless, robust and increasingly transparent whilst assisting in providing great, smart experiences and simultaneously support, not reduce, access to finance.

Ultimately, using human-centred design techniques in compliance reform ensures the broker’s, and the customer’s, experience is not left behind.

Compliance by Design

Compliance, like most functions, needs to be re-thought and disrupted. We need to get back to its intent: ensuring we service customers within boundaries that set long term sustainable outcomes for both the client and the broader environment.

To do so, we need to adopt a ‘First Principles’, strategic approach towards compliance. 

Banks have multiple legacy systems and fractured views of their clients, which makes delivering on a strategic outlook incredibly difficult. But for smaller, more agile organisations like aggregators and brokers, this can be achieved through aligning these changes with new digital solutions.  Check out some of Loan Market’s time-saving tech.

Adopting a strategic, ‘Compliance by Design’, mentality delivers an opportunity to build a reliable, effective compliance function that is fit-for-purpose. But it can also be agile enough to ingest new rules and, most importantly, ensure compliance isn’t being achieved at the sacrifice of customer experiences and outcomes.

At its essence, Compliance by Design needs to retain its absolute focus on the customers’ experience and outcomes. In this sense it should contribute towards the brokers interactions with the customer, and not subtract from this, as is typically the case today. 

Technology as an Enabler

With AI, IOT and Data Analytics, technology should be utilised to act as an enabler for compliant outcomes. 

As an example, utilising AI and ranking algorithms to support product recommendations will become increasingly critical. Yet, simultaneously, the need for human interaction will remain. In this example, AI will become the enabler, with brokers earning back time to focus on the customer experience instead of being distracted by manual or quantitative tasks. 

Further, combining data analytics with compliance know-how will help identify issues, providing real time feedback and the ability to prevent issues in the future.

Essentially, the future isn’t simply digital, but digitally-assisted. Digital enables scalability, efficiencies and more seamless customer experiences.

Policies and Processes will Change, Principles Won’t

Technology is rarely, if ever, the panacea to challenges. Essentially, a culture that fosters poor leadership, decision-making or behaviours will cripple any risk or compliance initiatives. 

This new era of principles-based regulation will require an evolution of the compliance function. We’re entering an era of increased focus on ethics, culture and principles that will enable change and simultaneously become a source of competitive advantage.  

Ultimately, it will be critical to ensure that we invest in developing and maintaining a strong ethical culture that is aligned to a clearly defined purpose. 

Broker Support and Engagement

Finally, in this new world, broker support and engagement will be more critical than ever. 

Obviously, the impacts of not meeting Best Interests are well-known. Yet this isn’t just about Best Interests: we also have factors such as the increasing role of AFCA and several future regulatory changes on the horizon. 

The ability to provide bespoke training that ensures all compliance requirements are being met will become critical. Further, this will have to extend to a more sophisticated on-boarding program that ensures support is there from the outset. 

At Loan Market, we have four key focus areas: keeping our brokers safe, saving them time, helping them grow their businesses, and helping them find and keep clients. To learn more, head to our website here.

I am a great believer that the compliance function should never be in isolation, and instead can help address all four of these. This is how compliance can become a competitive advantage for us. 

Having been across the country to talk to our broker partners, I’m more confident than ever that the Loan Market Way – integrated in to our award-winning technology platform MyCRM – will ensure our brokers are acting in customers’ best interests, while also supporting them in building a successful business. 

Rather than seeing Best Interests as something to fear, I’m excited to work with our brokers to further prove why customers continue to choose us – because we work for them. 

PUBLISHED March 13th, 2020 IN Stories and insights

David McQueen

Over the last decade, David has held senior leadership roles within multiple facets of financial services including strategy, product, risk, operations and distribution. David has a unique passion for compliance by design, and is responsible for the preparation and implementation of policies for new compliance measures at Loan Market.